SSE PLC (LSE:SSE) secured a contract worth close to £170mln to keep make it gas-fired power plants available next winter, as the UK government awarded a swathe of fossil-fuel contracts to power plant owners at record high prices.
The FTSE 100 group, which has made great efforts to switch to renewable energy sources in recent years, secured the lion's share of £375mln of contracts awarded last night, including a contract for a coal-fired plant from Uniper, and other contracts for British Gas owner Centrica PLC (LSE:CNA) and E.ON.
National Grid PLC (LSE:NG.) said the capacity market auction, to ensure enough electricity capacity is available for 2022/23, was completed at a record high of £75 per kilowatt (kW) per year on Tuesday evening.
A total of nearly 5 GW of capacity was awarded in the auction, Reuters reported, with over 3.4 GW from gas-fired plants.
The record price demonstrates the current tightness of UK power markets, RBC analysts said, and suggested next week’s auction to secure initial capacity for the winter of 2025-26 “could also achieve record results” and benefit a larger number of companies.
However, the analysts said it could raise concerns over the cost to consumers.
A spokesman for the Department for Business, Energy and Industrial Strategy said: “The capacity market is worth paying for to provide secure and affordable electricity.”